Arenas of Competition represent an increase in the complexity of the competitive structure analysis to focus on the nature of competition. Competitive arenas are groups of market players that apply similar strategic, operational and marketing tools and compete on the basis of similar competitive advantages.
Four types of arenas of competition are generally recognizable, each characterized by a different competitive advantage:
- Price and quality
- Timing and know-how
- Deep pockets
Competition in each market segment naturally evolves within single arenas. As competition increases, an escalation occurs across different arenas, with a fundamental change in the nature of competition. The final stage of competition evolution is the eventual disruption of competitors’ own strategic competitive advantage. Leading firms build new competitive advantages to avoid profit erosion from competitive imitation of the old advantage.
- Groups of firms compete on the basis of the same competitive advantage
- Allows a full understanding of the nature of competition facing a company and its key success factors
- Allows the identification of the critical issues facing a company
- While competitive advantages could be clear to identify, the step of the arena we are in could be unclear